Fed Policy Pivot Crushes Bitcoin Hopes
The Federal Reserve's policy pivot has sent shockwaves through the market, causing Bitcoin to face intense pressure. Expectations of rate cuts have reversed by 200 basis points, with a new scenario anticipating four rate hikes before 2027. This shift in expectations is forcing a re-pricing of Bitcoin, making interest rates a key factor driving short-term asset prices.
Market volatility around $80,000 reflects the market's stress response to the Federal Reserve's policy change. Billionaire Stanley Druckenmiller has publicly stated that interest rate cuts are 'no longer necessary,' further fueling hawkish sentiment. The bond market is also playing a crucial role, as traders assign nearly a 90% probability to the Fed raising rates next week.
The CME FedWatch tool indicates that traders expect a significant rate hike, with some analysts predicting a 25-basis-point increase on September 16. This would put additional strain on Bitcoin, which has seen its rally driven by short-covering and liquidity expectations stemming from Treasury transactions.